Abstract: Initial estimates of aggregate output and its components are
based on very incomplete source data, so they may not fully
capture shifts in economic conditions. In particular, if those
estimates are based partly on trends in preceding quarters,
provisional estimates may overstate activity when actual output
is decelerating and understate it when actual output is
accelerating. We examine this issue using the Real Time Data Set
for Macroeconomists, which contains contemporaneous estimates of
GNP or GDP and its components beginning in the late 1960s, as well as
financial-market information and other data. We find that
provisional estimates tend to partially miss accelerations and
decelerations. We also consider whether better use of
contemporaneous data could improve the quality of provisional
estimates. We find that provisional estimates do not represent
optimal forecasts of the current estimates, but that the improvement
in forecast quality from including additional data appears to be
quite small.
Keywords: Business cycles, macroeconomic data
Full paper (214 KB PDF)
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Last update: November 30, 2001
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